Answer (B) is correct. Operating leverage is a measure of the degree to which fixed costs are used in the production process. A company with a higher percentage of fixed costs (higher operating leverage) has greater risk than one in the same industry that relies more heavily on variable costs. However, such a firm is also able to expand production rapidly in times of higher product demand. Thus, the more leveraged a firm is in its operations, the more sensitive operating income is to changes in sales volume.